2018 (8) TMI 1662 - AT - Central Excise

CENVAT credit - common input credit availed for use in manufacture of exempted product - appellant reversed the proportionate credit attributable to the exempted products - The only allegation on which the demand has been confirmed is that the appellant has not filed the declaration as contemplated under Rule 6(3) of CCR, 2004 - Held that - In various decisions, the Tribunal has held that the said requirement to file a declaration intimating the option excised by the appellant is only a procedural one - demand unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of CENVAT credit on inputs and capital goods for manufacturing exempted products.
- Alleged failure to file a declaration under Rule 6(3) of CENVAT Credit Rules, 2004.
- Demand for payment of 10% / 5% of the value of exempted products under Rule 6(3) of CENVAT Credit Rules, 2004.
- Applicability of retrospective amendment introduced by the Finance Act, 2010.
- Interpretation of procedural requirement to file a declaration under Rule 6(3) of CENVAT Credit Rules, 2004.

Analysis:
The appellants were involved in the manufacture of gear box assembly and gear motor assembly, including for Wind Operated Electricity Generators, and availed CENVAT credit on inputs and capital goods. They also availed common input credit for exempted products and reversed the proportionate credit attributed to such products. However, the department demanded payment equal to 10% / 5% of the value of exempted products under Rule 6(3) of CENVAT Credit Rules, 2004. The adjudicating authority confirmed the demand, interest, and penalties, leading to an appeal by the appellants before the Tribunal.

The appellant argued that they had complied by reversing the credit, which should have been sufficient notification of their choice, as per the decision in Commissioner of Central Excise, Chennai Vs. ICMC Corporation Ltd. The appellant's counsel contended that the demand was unjustified solely based on the failure to file a declaration under Rule 6(3) of CENVAT Credit Rules, 2004. The Tribunal had previously remanded the matter to consider the issue in light of the retrospective amendment introduced by the Finance Act, 2010, emphasizing that the requirement to file a declaration was procedural. Citing precedents, including the ICMC Corporation Ltd. case, the Tribunal held that when the appellant had reversed the proportionate credit, the demand for payment of 8% / 10% of the value of clearances could not be sustained.

Consequently, the Tribunal found the demand to be unjustified, set aside the impugned order, and allowed the appeal with any consequential relief. The decision was based on the interpretation that the procedural requirement to file a declaration under Rule 6(3) of CENVAT Credit Rules, 2004, was met by the appellant's action of reversing the credit, leading to the dismissal of the demand for additional payment.